The Sale of a Residence to a Spouse in a Divorce

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For many couples, one of the most heated aspects of divorce is asset division. Rather than fighting over who gets to keep the family home, some couples opt to sell the house and split the proceeds. If your spouse has a deep-seated emotional attachment to the property, but you want to sell the home, you may agree to let your spouse buy out your interest in the property. You benefit from the cash proceeds, while your former spouse benefits by being permitted to keep the property.

Home Buyout

As you and your spouse paid down your mortgage, you built equity in the property. If your spouse has the financial stability to do so and you agree, your spouse can “buy out” your share of the equity. After you receive your share of the home's equity, you then sign over all rights to the home's title to your former spouse. A buyout is an option only if the two of you owned the home for long enough to build equity in the property.

Divorce Decree

Although you and your spouse can work the details of the arrangement out between yourselves, asking the court to include the buyout in your divorce decree protects both of your interests. A divorce decree is legally binding to both you and your former spouse. If either of you violates the terms contained in the decree, you are breaking the law. Bankrate.com warns that although some aspects of a divorce decree can be modified, such as child custody arrangements, property division is final. Thus, once your divorce is final, you cannot change your mind about allowing your spouse to buy out your interest in the home you previously shared.

Warning

A divorce decree is legally binding, but only to you and your former spouse. Third parties are not bound by the terms of the decree. For example, if you and your former spouse share liability for a mortgage on the property, that liability does not disappear when you sign the title over. The Federal Trade Commission notes that joint creditors can still pursue you for debts you share with your former spouse – even if the divorce decree absolves you of your liability for the debt.

Refinancing

You can allow your spouse to buy out your share of the home's equity and simultaneously eliminate your liability for the mortgage by stipulating that your spouse refinance the property into her own name. When your spouse refinances the home, she takes out a new loan. The new loan pays off the existing mortgage that you remain liable for and creates a new mortgage on the property. Because you are not legally liable for the new mortgage, you can sign over the home's title without fear of credit damage or lawsuits should your former spouse stop making payments on the home loan.